What is an Endowment?
An endowment is a financial asset or donation given to an institution, typically a nonprofit organization, with the intention of providing ongoing support or funding for specific purposes. It is often created by individuals, families, or organizations to ensure the long-term financial stability of the recipient institution.
Endowments are commonly established for educational institutions, such as universities & colleges, hospitals, museums, libraries, and other charitable organizations. The funds contributed to an endowment are typically invested, and the income generated from these investments is used to support the designated activities or programs of the institution.
The principal amount of an endowment is generally kept intact, and only a portion of the investment returns, known as the “endowment payout,” is distributed each year. This approach allows the endowment to provide ongoing financial support over an extended period, in perpetuity.
Endowments can have specific purposes or be unrestricted, allowing the recipient institution to use the funds according to its discretion. Donors often establish endowments to support scholarships, research initiatives, faculty positions, infrastructure projects, or any other area that aligns with their philanthropic goals.
The management and oversight of endowments are typically the responsibility of the institution’s board of trustees or a dedicated endowment committee. Their primary objective is to ensure the responsible stewardship and growth of the endowment assets to maximize the long-term benefits they provide.
Just as Albert Einstein once called compound interest “the most powerful force in the universe,” endowments carry an inherent power to provide for community needs through continued growth. Over time, the distributions exceed the original gift, while the fund balance continues to grow.
How Does It Work?
Agency endowments are invested to grow over time, and a portion of the earnings, as determined by our spending policy, is returned to your organization annually or allowed to grow if the nonprofit prefers saving the earnings for a later time. You now have a permanent source of community capital that will assist with financial stability now and forever.
- Determine the amount your organization would like to invest in an endowment.
- Meet with our staff to complete a fund agreement. The minimum is $10,000, however, we allow three years for an organization to build its fund to the minimum.
- Our staff members handle all the administrative and accounting details, while our Investment Committee ensures expert investment management, and oversight to assure that investment managers meet benchmarks.
- Your nonprofit organization has 24-hour, online access to your financial statements.
- Your donors can add to your endowment at any time in any amount. Your donors may also establish a separate designated endowment that benefits your organization. The Foundation can assist your donors in setting up this type of fund.
Have Questions? Contact Us for additional information or help!
